A bench led by Chief Justice of India T S Thakur asked the government to justify under law its notifications for demonetising Rs 500 and Rs 1000 notes.

The court, however, did not find it apt to stay the notification, and clarified that it was not interfering with the economic policy, for now. (File Photo)

ASSERTING THAT “the common man should not be made to suffer” in the course of demonetising Rs 500 and Rs 1,000 notes, the Supreme Court Tuesday told the Centre that the objective to tackle black money and fake currency may be laudable but everyone with old currency cannot be treated as hoarders of black money.

A bench led by Chief Justice of India T S Thakur asked the government to justify under law its notifications for demonetising Rs 500 and Rs 1000 notes, apart from listing various steps it has taken since November 8 to make sure inconvenience to people is mitigated.

“It has become traumatic for people to go and stand in queues to get their own money…this could be money which is properly taxed and is in their own bank accounts. Common man should not be made to suffer. We all know these queues are very long and people keep turning up hours after hours, days after days to be able to withdraw their own money,” the bench, also comprising Justice D Y Chandrachud, told Attorney General Mukul Rohatgi.

The court, however, did not find it apt to stay the notification, and clarified that it was not interfering with the economic policy, for now.

But, at the same time, it underlined that a large number of daily wagers, carpenters, vegetable sellers and others engaged in menial jobs, who earn their bread and butter on a daily basis, were badly affected by the government’s move.

“Your objective may be laudable but you cannot accuse everyone who has a Rs 500 note to be hoarding black money,” the top court told the AG. It said that the situation was more like “carpet bombing” and not a “surgical strike” since “everyone is affected”.

Hearing a clutch of PILs that have challenged the validity of the notifications, the bench asked the government to submit by November 25 a comprehensive affidavit over the legal validity of the notifications as well as elaborate on measures it has taken subsequently to address concerns of the people.

It added: “There is a general feeling that inconvenience has been caused to people who may have nothing to do with black money… those standing in long queues are not the ones you want to target for black money. For the present, we are only wondering if you can do something to reduce their suffering…we may understand your objective behind these notifications but instead of forcing common man to stand in queues for hours, why don’t you raise the limit of money?”

Rohatgi sought to emphasise that it was a policy decision taken after extensive deliberation and that the government was willing to identify areas and take corrective steps to prevent hardship to the common man.

At this, the bench clarified that it was not looking at the prospect of staying the policy decision but asking the government to identify areas that required immediate attention and take additional measures. This, it said, was especially in view of the AG’s argument that there is a limited capacity to print new notes and that it would take some time to recalibrate the ATM machines to dispense the new currency.

The court also acknowledged that the objective behind the demonetisation appeared to be coaxing people, who have hoarded black money, to deposit it in banks. “It is not something we call illegal or undesirable since black money may be used in funding terror and in other illegal activities… There seemed to be some collateral damage in this process,” it said.

Leading the arguments on behalf of a batch of petitioners, senior advocate Kapil Sibal disputed the validity of the notifications, stating that the RBI Act did not accord the government authority to demonetise all series of notes of any particular denomination. He added that the government could not impose any condition for withdrawing money and that the decision tantamounts to a surgical strike against the people of the country.

“We support all endevaour to curb black money but not every Rs 500 and Rs 1000 note can be treated as black money. One can have legitimate currency in cash, too. It is my tax-paid money and a bank is only a trustee. How can I be stopped from withdrawing my own money? People cannot buy ration…they cannot get proper treatment…11 people have died for want of treatment. What kind of reasonableness is this where you are jeopardising lives of people?” Sibal contended.

Defending the move, the AG called the petitions as “misconceived” and argued that it was not necessary to pass a law to demonetise any currency. “A law will have to be brought only by March 31, 2017 to state that possession, transfer and usage of the old currency will be illegal. Yes, I agree there is some inconvenience to people but if you have an operation of this magnitude, some collateral damage has to happen,” he said.

Rohatgi pointed out that Rs 3.25 lakh crore has been deposited in the banks since November 10. “According to our estimate, the black money size could be around Rs 15-16 lakh crore. We expect people to deposit Rs 10-11 lakh crore in banks. The rest, Rs 4-5 lakh crore, were being used in northeast and Jammu and Kashmir to fuel trouble in India. That will be neutralised,” he said.

The AG said that people have waited in queues for getting ration, cooking gas, telephone connection, too, while the objective seemed to be of far greater importance now.

“Unfortunately, there is some pain to poor people and we are trying to do what we can to address it. We could not recalibrate the ATM machines earlier since the cat would have out of the bag. Besides, there is only a limited capacity to print notes. We are trying to ramp up the ATMs to the best of our capacity,” he said.

At one point, Sibal contended that the real purpose behind the government’s move was to wipe out the mounting bad debts. “They want to use this money to wipe of Rs 6 lakh crore of Non-Performing Assets (NPAs). So, at the cost of benefitting rich people, who have taken loans but have not paid back, they are creating troubles for the common man,” he said. Rohatgi rejected this proposition.